William the supply chain by establishing the Malden

William the supply chain by establishing the Malden

William M. Grissett Business ethics WK 4 Research paper Malden Mills Ethical question June 25, 2009 Aaron Feuerstein greeted the brisk New England morning of December 11th, 1995 with unusual optimism, especially for a man almost seventy years old.

After all Malden Mills was the last of the New England garment factories, and a century old family business besides! Known as the leading innovator, producer, and marketer of branded, high quality performance textiles for the outdoor products industry may require a much younger man he mused.Little did he know that before the day ended he would be faced with the biggest decision in Malden Mills’ history. Samuel Slater, a former apprentice in a British mechanized textile factory introduced the Industrial Revolution into the United States in 1790, when he established a similar mill in Pawtucket, Rhode Island. Mechanized textile factories quickly sprang up throughout New England.In 1814, at a cotton mill established by the American industrialist, Francis Cabot Lowell in Waltham, Massachusetts, all the steps of an industrial process were, for the first time, combined under one roof: cotton entered the factory as raw fiber and emerged as finished goods ready for sale.

It was in this center of the textile industry that Henry Feuerstein, an immigrant from Hungary, incorporated Malden Knitting Mills in the city of Malden (five miles north of Boston) in 1906. The company began as a knitted product manufacturer producing woolen bathing suits and sweaters.In 1923 the company integrated backward into the supply chain by establishing the Malden Spinning and Dyeing Company.

Looking for expansion space away from the cities, which had developed as a result of the mills, many large New England fabric operations began to construct new facilities closer to the source of their cotton raw materials in the south. Coupled with a lower cost workforce, this search for new manufacturing space began the migration of the volume producers to the Carolinas after World War II.Aaron Feuerstein, grandson of the founder, and current Chairman, President, and CEO, of Malden Mills decided against relocating his mill outside of New England.

In 1956, he took advantage of low-cost mill space, which had become available in Lawrence, Massachusetts due to the industry migration to the South. Beginning with the move to Lawrence, Malden adopted a business model, which called for the conversion of yarns to the fabric stage in small outlying plants in Maine, New Hampshire and Vermont and transporting these fabrics to the central dyeing, printing and finishing facility in Lawrence.Feuerstein asserts that a great many of the companies that moved to the South failed anyway, despite the lower wages because they gave too much attention to costs and not enough to quality. “Why would I go to Thailand to bring the cost lower when I might run the risk of losing the advantage I’ve got, which is superior quality. In any case, lower wages are a temporary advantage.

Quality lasts. At least it can last if you focus hard on expertise and the freedom to innovate. But to do that, you have to focus hard on employees. ” Commitment to those who work at Malden Mills is at the heart of Feuerstein’s management philosophy.Feuerstein treats his employees with human respect, partly because he is a religious man, but also because of his firm belief that “happy employees” make “productive employees. ” During his years as CEO, Feuerstein has arranged for heart-bypass operations for several workers and offers of free soft drinks to workers during the days of summer heat on the manufacturing lines. He feels the relationship between management and employees is a vital one — one that mistrust need not ruin but one that should be fostered and which in turn will foster the growth of the company.

And finally, he believes the quality of the product is paramount and it is the employee who makes the quality; if the quality slips, the employee can destroy the company’s profit. In addition to considering his workers an asset, not an expense, Feuerstein also extends corporate responsibility best practices to the community where his factory is located, and the world at large. Corporate social responsibility emphasizes the participation of the organization in a larger society and its responsibility to support good causes.It emphasizes corporate citizenship, philanthropy, and community support and recognizes community-based obligations and responsibilities. Feuerstein has an impressive record of philanthropy in the community, having supported a number of groups, activities, and religious organizations. From Malden Mills he has provided blankets and garments for homeless children in the New York area, for relief efforts to Kurdish refugees, displaced persons in Kosovo and numerous other disaster areas around the world.

In August 1999, the company donated 2,000 Polartec fleece blankets for Turkish relief following a devastating earthquake. Later that year the spirit of giving continued with the donation of 150 Polartec Wellness Hats to ovarian cancer patients. Where did Feuerstein get his extraordinary ideas about worker-management relations and corporate responsibility? Feuerstein, an Orthodox-Jew, draws from the religious tradition of The Golden-Rule Model, which states that one should always treat other people in the same way he or she would want to be treated.In other words, when confronted with any ethical issues, each individual should identify the available courses of action and choose the one that treats others with the same dignity and respect he himself would expect. Any costs or consequences that would ensue with this choice would be secondary to the basic focus on the “Golden Rule.

” The primary sources of inspiration for Feuerstein were his grandfather, father, and uncles. “We all had to be at my father’s table,” he says, “I was seven years old when I heard my father tell a story I never forgot. Aaron’s father, Sam, had watched his father, Henry, who founded the factory, go around at the end of the day and give money to every one of his workers. Sam explained to Henry, a Hungarian immigrant, that this was not the American way. Henry screamed at his son that it was against the Torah to do it any other way. Young Aaron consulted his rabbi, who happened to be his maternal grandfather.

His other grandfather, he was told, was right. In Leviticus, it is written, “You are not permitted to oppress the working man because he is poor and needy. Aaron memorized the passage in Hebrew – and lives by it.

Other sources which offer some interesting insights concerning the relationship between management and employees are the writers and philosophers Feuerstein reads. For instance, Kant’s Categorical Imperative goes to the heart of the issue: in order for business to be morally acceptable, all parties must be treated with mutual respect because we as people deserve it. Kant writes: “Act in such a way that you always treat umanity, whether in your own person or in the person of any other, never simply as a means, but always at the same time as an end. ” This management philosophy is not without its critics. One guiding principle for the past half-century has been the words of Milton Friedman: “In a free economy there is one and only one social responsibility of business – to use its resources and engage in activities designed to increase its profits so long as it stays within the rules of the game, which is to say, engages in open and free competition, without deception or fraud. More recently the management/employee relationship appears to fall behind the Primary Promissory Relationship between management and stockholders.

This argument states that management agrees (promises) to maximize stockholder wealth in return for specific compensation. Following from this is the assertion that such a relationship imposes an obligation on management that is inconsistent with any other responsibility other than maximization of the company’s profit. Thus the relationship becomes an adversarial one – almost as if management and workers were on two different competing teams.Scott Adams has immortalized the current atmosphere as the “The Dilbert Principle of Business,” which basic tenet maintains that the most ineffective workers are systematically moved to the place where they can do the least damage: management.

Feuerstein’s example as CEO at Malden Mills suggests that the relationship between management and employees should be a civil one, not a warring one. This team effort would be tested in the 1970s and 1980s with the collapse of the imitation fur business, which at the time represented approximately 50% of Malden’s revenue.With many competitors chasing a dwindling market and with Malden caught with high inventory levels just as inflation and interest rates hit the highest levels in US history, Malden filed for Chapter 11 protection. The company emerged from Chapter 11, exited the imitation fur business and was able to get back on a growth plan through its market-leading flock and woven upholstery products and the introduction of the first generation of what has become an entirely new product category, 100% polyester performance fleece known worldwide under a variety of registered trademarks including Polartec and Polarfleece.

Funded by the knitting operation, Malden invested in the technology to develop and innovate fabrics utilizing the properties of the new manmade fibers. From the early 1980s until 1995, the company established a dominant position as the preferred supplier in both of its primary markets, flock and woven upholstery products and high performance fabrics. As the performance outdoor clothing industry grew rapidly in the United States with the advent of layering systems, Malden Mills was poised to take advantage of the market.However, as history dictates during the early evening hours of December 11, 1995, a fire broke out in the mill in Lawrence, Massachusetts and by morning, the fire had destroyed most of Malden Mills facility. The fire seemed a disaster to the company, its employees, its customers, and the surrounding communities. The disaster promised many headaches for Malden Mills and for the numerous businesses that depend on its products. But the fire also was a disaster for an entire community.

The towns surrounding the Malden Mills plant have long been home to textile manufacturing. But the industry effectively died during the middle decades of the twentieth century when outdated factories and increasing labor costs led many companies to abandon the area and relocate, first to the nonunionized south, and later to foreign countries such as Mexico and Taiwan. As happened in many northern manufacturing towns, the loss of major industries, along with their jobs and tax base, began a long period of economic decline from which many have never recovered.Malden Mills was the last major textile manufacturer in town, and with 2,400 employees it supplied the economic lifeblood for the surrounding communities. Considering both its payroll and taxes, Malden Mills contributed approximately $100 million a year into the local economy. As CEO and president, Aaron Feuerstein faced some major decisions. He could have used the fire as an opportunity to follow his local competitors and relocate to a more economically attractive area.

He certainly could have found a location with lower taxes and cheaper labor and thus have maximized his earning potential.He could have simply taken the insurance money and decided not to reopen at all. Instead, as the fire was still smoldering, Feuerstein pledged to rebuild his plant at the same location and keep the jobs in the local community. But even more surprising, he promised to continue paying his employees and extend their medical coverage until they could come back to work. The story of Malden Mills continued to be an eventful one; in January 2000, employees who had been injured in the 1995 fire bit the hand that had fed and clothed them—suing Feuerstein and the ompany for negligence.

The employees had just days earlier settled an $18 million lawsuit against several Malden suppliers who they blamed for the fire. Malden itself had been cleared in a 22-month investigation by the Massachusetts Fire Marshal and in a similar investigation by the Industrial Accidents Board. Feuerstein and the disgruntled employees settled the lawsuit in December 2000; terms were not disclosed. Though Feuerstein valiantly tried to prevent it, Malden Mills was forced to declare bankruptcy in late 2001.Given the firm’s history of rising from its ashes, hopefully this is another temporary lull from which Feuerstein and his employees would emerge anew.

Malden Mills will forever be remembered for two things: the generosity of Aaron Feuerstein and his unswerving belief in his company and its products. Polartec fleece products, which are now made from 100-percent recycled materials, revolutionized the textile industry and remain the fabric of choice among discriminating clothiers.Works Cited http://www.

fundinguniverse. com/company-histories/Malden-Mills-Industries-Inc-Company-History. html http://www. boston. com/business/gallery/maldenmillshistory/ http://www. polartec. com/about/history.

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